Venezuela Crackdown in Caracas

By Lisa Beyer

At his Feb. 2 inauguration, President Carlos Andres Perez warned Venezuelans that hard times were ahead for their heavily indebted, oil-exporting country. Even he had no idea how hard -- or how soon. Last week the citizens of one of Latin America's most stable democracies were in shock after a social explosion that tore apart downtown Caracas, the capital, and shattered the peace in at least 16 other cities. Government-imposed austerity measures had ignited a three-day free-for-all of rioting, looting and killing that left an estimated 300 people dead, 2,000 injured and another 2,000 in jail.

Venezuela had not seen such mayhem since 1958, when a popular insurrection toppled dictator Marcos Perez Jimenez and ushered in democracy. Overnight, Venezuelans faced martial-law restrictions, including a 6 p.m.-to-6 a.m. curfew. When the riots ended, severe food shortages in the capital threatened to stir more disquiet. The most important victim of the upheaval was probably President Perez himself, who had begun his second term in office (the first was from 1974 to 1979) with a huge margin of popularity. That goodwill was suddenly forgotten when the rattled leader failed to stop the violence with a rambling, sometimes angry television address. Meantime, Venezuela had provided the world with an ugly example of the trials Latin America faces in trying to step out of the debt quagmire.

Perez, who has long inveighed against his continent's onerous financial burden, had finally found austerity unavoidable. Venezuela owes foreign creditors, largely U.S. commercial banks, about $33 billion. In the 1970s, when the country was awash with petroleum revenues, the government that Perez headed spent lavishly on social-welfare projects and industrial schemes. But as oil prices took a dive in the 1980s, so did the economy, which earned 90% of export revenues from petroleum. Hard-pressed for cash, Venezuela last Dec. 31 suspended payments for 90 days on the bulk of its foreign obligations.

Last month the government signed a letter of intent with the International Monetary Fund (IMF) in return for $4.32 billion in new credits through 1991. Among other things, the agreement promised an end to Venezuelan subsidies on an array of products, including imported raw materials and gasoline (at 13 cents per gal., perhaps the cheapest in the world). Exempted from the price hikes were 18 staples, including bread, rice and chicken. Perez also promised to raise fees for government-provided goods and services and to allow the bolivar to float downward on international currency markets, a move that would boost import prices.

With the initiation last week of the first of the new measures -- an increase in the price of gasoline to a still indulgent 25 cents, plus an average 30% hike in bus fares -- Venezuelans went wild. In Caracas and the provinces, unruly mobs torched cars and buses. They quickly turned to looting stores, stealing everything from legs of beef to stereo components. Angry merchants defended their shops with gunfire in an orgy of crime and spontaneous punishment.

At 2 a.m. the following morning, Perez ordered the army and National Guard to occupy the capital and several other cities. Later that day he went on national television to announce a curfew and suspension of constitutional guarantees such as freedom of speech and assembly. In a disorganized, unimpressive speech, the President blamed the unrest on "subversive sectors" seeking to "take advantage of difficult times." "This is a popular protest by the people," replied Luis Fuenmayor, the rector of Venezuela's Central University. "To view it any other way is to fool oneself."

The chaos continued and grew uglier. A police commander was shot dead in West Caracas. Downtown, armored personnel carriers rushed fatigue-clad National Guardsmen to the myriad scenes of continued looting. Virtually the entire city was shut down by the violence.

By the third night, order had been restored, except for a few isolated areas of Caracas. Interior Minister Alejandro Izaguirre then announced wage increases of about $54 a month for some 5 million private-sector workers. Critics lambasted Perez for having imposed price increases before announcing the hikes and for signing the IMF agreement without consulting opposition parties or labor leaders. Perez himself struck an oddly optimistic note. "We managed to get out of this relatively well," he said, adding that austerity had to continue to "get Venezuela out of economic insecurity."

But Perez's image had been tarnished. Since his Dec. 4 election, he had spent much of his time abroad, pursuing his vision of creating a united debtors' front that would stand up to the IMF and other creditors. Publicly, Perez disclaims any interest in fathering such a group, but those closest to him say it is his passion. At his swearing-in, the President had boasted of elevating Venezuela's profile in world affairs; his domestic troubles may now stunt those vaulting ambitions.

On the other hand, the Caracas affair could advance the case for a debtors' cartel. In the future, Perez and fellow Latin leaders may point to last week's carnage as a reason to avoid additional austerity programs. On Venezuelan streets that glistened with blood and broken glass, that argument looked sadly compelling.

With reporting by Steven Gutkin/Caracas and John Moody/San Jose